The cost of Windows Phone 7 on Nokia? $1 billion (Bloomberg)

Microsoft will pay Nokia more than $1 billion in the companies’ deal to make Windows Phone 7 the flagship operating system on Nokia smart phones, Bloomberg News reports.

That will be offset some by the software licenses Nokia buys for each of its Windows Phones, which are slated for release later this year, according to the report. But $1 billion is, well, a large number — Microsoft is betting big for the chance to push its new platform into the hands of customers who want devices from the world’s largest mobile-phone manufacturer.

But Microsoft arguably has less to lose: Nokia is trying to crawl back from years of plummeting sales, while Microsoft is looking to get the word out about its reinvented operating system.

The deal is about more than just Windows Phone 7 licenses — Nokia gains access to other Microsoft technology, and vice versa. Nokia had also been considering Google’s surging Android platform, but Nokia CEO Stephen Elop’s connection to Microsoft (he is a former executive) and Microsoft CEO Steve Ballmer‘s perseverance likely carried some weight.